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Denver Small Business

Vectra Bank Colorado Small Business Index for Colorado
June 2011 Release

July 14, 2011

Written by Jeff Thredgold, President, Thredgold Economic Associates
Economic Consultant to Vectra Bank Colorado

SLOWING GLOBAL ECONOMIC GROWTH NOT MUCH HELP TO COLORADO’S SMALL BUSINESSES

HIGHLIGHTS

  • The Vectra Bank Colorado Small Business Index for Colorado measured 116.8 in June 2011, down from a 117.4 in May 2011
  • Colorado’s unemployment rate was estimated at 8.7% in the latest month, down from the prior month’s 8.8% rate.  Total employment grew by 7,700 jobs during the past 12 months
  • Slowing global economic growth won’t provide much in the way of stimulus for Colorado’s small business sector
  • The U.S. economy added an estimated 18,000 net new jobs in June, below expectations.  In addition, estimated job gains of the two prior months were revised lower by 44,000 jobs.  The U.S. unemployment rate rose to 9.2% in June, versus May’s 9.1% rate

SLOWING GLOBAL ECONOMIC GROWTH

Global economic performance has slowed in recent months, falling victim to higher energy and food costs, and rising anxiety about potential developments in Greece that could impact various nations around the globe.  More recently, lower energy costs—should they continue—could help the global economy to pick up its modest growth pace later this year and early in 2012.

The three major economies of the world, the U.S., China, and Japan, have all seen growth slow in recent months.  U.S. economic growth was sluggish during 2011’s first half, even as fiscal and monetary stimulus was at unprecedented levels.  Chinese leadership is trying to slow that economy to keep inflation under wraps and real estate markets from overheating.  Japan is flirting with recession again.  In addition, Indian growth has slowed as that nation deals with near double-digit inflation. 

The broad European economy is dealing with the demands of austerity for Greece, Ireland, and Portugal.  Other European nations vulnerable to credit market anxiety, such as Spain and Italy, are also attempting to slow spending and boost revenues in order to cut large annual budget deficits.  German economic performance remains solid.

South American growth ranges from mild to strong, led by Brazil.  Mexican growth has been the best in 10 years, even as drug cartel violence dominates the headlines.  Canadian growth has slowed. 

The level of global economic performance is a component of the Small Business Index, as is the pace of U.S. economic growth and U.S. regional performance.  Weaker global growth would likely contribute to weaker U.S. and regional performance.

IN COLORADO

The Colorado unemployment rate—the most heavily weighted component of the Vectra Bank Colorado Small Business Index for Colorado—was estimated at 8.7% in the most recent month, down from the 8.8% rate of the prior month.  The 8.7% rate compares to the 8.9% rate 12 months ago.  A lower Colorado jobless rate is a negative contributor to the Index as it suggests decreased access to labor for small businesses. Other associated factors typically tied to a lower unemployment rate, such as greater job creation, greater income gains and higher retail sales, pull the Index higher.

The state’s unemployment rate averaged 8.9% during 2010, 8.3% during 2009, 4.9% in 2008, 3.7% in 2007, and 4.3% in 2006.  Colorado’s jobless rate averaged 4.6% between 1990 and 2005.

The last 12 months saw an estimated increase in Colorado employment of 7,700 jobs.  This increase compares to a revised gain of 7,200 jobs in the prior year-over-year period.  Colorado lost 25,500 jobs in 2010, lost 104,700 jobs in 2009, added 19,000 jobs in 2008, added 52,200 jobs in 2007, and added 53,100 jobs in 2006.   

These job totals compare to gains averaging 46,500 net new jobs annually between 1990 and 2005.   More recently, job gains leading to greater income creation and stronger retail spending, have a positive impact upon Colorado’s small businesses…and therefore, the Index.

The Vectra Bank Colorado Small Business Index for Colorado was 116.8 in June 2011, down from a 117.4 in May 2011.  The Index measures business conditions from the viewpoint of the Colorado small business owner or manager.

A lower Index number is associated with less favorable business conditions for Colorado’s small businesses.  The Index uses 100.0 for calendar year 1997 as its base year.  The Index also includes revisions to various historical and new forecast components as they become available.

Colorado Small Business Index

NATIONAL EMPLOYMENT

The U.S. Department of Labor reported a net gain of 18,000 jobs in June 2011, much weaker than the 125,000 net gain expected.  In addition, estimated job gains of the two prior months were revised lower by 44,000 jobs.
 
The U.S. unemployment rate rose to 9.2% in June, versus May’s 9.1% rate.  The current 9.2% jobless rate compares to the 9.5% rate of one year ago, the 9.5% rate of June 2009, and the 5.6% rate during June 2008. 

Goods producing employment rose by 4,000 jobs in June, with a small loss in construction employment offsetting small gains in manufacturing and mining & logging.  Private sector service providing employment rose by 53,000 jobs in June, led by gains in trade, transportation & utilities and leisure & hospitality.  Overall government employment fell by 39,000 jobs during the month, tied to weakness at the state and local level.

The U.S. economy suffered a net decline of 3.6 million jobs during 2008, the worst year since 1945.  The net loss of 5.1 million jobs during 2009 easily surpassed the 2008 total. 

The American economy added 940,000 net new jobs during 2010, or 78,000 per month.  We estimate a net gain of 2.0 million jobs during 2011.  Roughly 130,000 net new jobs need to be added monthly just to meet the needs of a rising population, and just to keep the unemployment rate stable.

 

The July 2011 Vectra Bank Colorado Small Business Index for Colorado will be released on August 11, 2011.

Jeff Thredgold
Thredgold Economic Associates
Economic Consultant to Vectra Bank Colorado
(801)614-0403

©Copyright 2011 Thredgold Economic Associates